Iluka boss condemns China’s rare earths monopoly

Iluka Resources boss Tom O’Leary has taken a shot at China’s “monopolistic production” of rare earths and warned of the country's preparedness to “weaponise” its control.

Addressing shareholders at Iluka's annual general meeting, Mr O’Leary said it was China’s production dominance alongside pricing interference that was resulting in market failure, in which he said no one was making any money regardless of geographic location.

“It is this monopolistic production, combined with interference in pricing, that is resulting in market failure; and rare earths are among very few metals where China has demonstrated a preparedness to weaponise its control,” he said.

“Our CFO, Adele Stratton, will present at an investor conference in the coming days and will demonstrate through publicly available information that no participants, regardless of geography, is making any money at today’s prices.

“With all that said, we must acknowledge that the position China occupies in rare earths today is the result of a deliberate, highly successful approach spanning almost 40 years. The tactics it employs disincentivise Western and other likeminded countries from developing refineries like Eneabba.”

Mineral sands miner Iluka is building its Eneabba rare earths refinery north of Perth, a major growth project for the company.

Earlier this year, the ASX-lister confirmed the cost of the refinery would be near the top end of its upped guidance range of $1.7 billion to $1.8 billion, up 50 per cent from the initial estimate of $1.2 billion.

The project is backed by the federal government with a $1.25 billion loan through its Critical Minerals Facility. Mr O’Leary reiterated that he was still in discussions with the government on securing additional funds to help cover costs. 

In his address, Mr O’Leary said Australia’s position at the centre of the rare earths value chain would depend on the alignment of public policy settings. He said the alignment was starting to take place, despite still having some way to go.

“The Treasurer’s recent announcement of reforms to Australia’s foreign investment rules marks a key development," he said.

"So too the Prime Minister’s emphasis on capitalising on our comparative advantages and building sovereign capability in areas of national interest as part of the Future Made in Australia Act."

Further, he said the dominant position China had attained in rare earths was “surely evidence of the unintended consequences of a doctrinaire ‘market forces’ mindset". 

Also in the address, Mr O’Leary said there were clear and ongoing efforts, including by Chinese state-owned entities, to extend the nation’s “monopoly by controlling Australia’s rare earth deposits”.

“From Western Australia to Western Victoria, this is taking place via a number of binding offtake agreements with various companies, and via ownership- as in the well documented case of Northern Minerals, among others,” he said.

“Further still, China’s influence over the global rare earths market is pervasive, including through pricing indices such as the Asian Metals Index.”

Mr O'Leary said from a marketing perspective, Iluka was clear on its approach of not inextricably linking the price of its product to the Asian Metals Index. He said this contrasts with the approach taken by others. 

"Our firm view is that the development of strong and independent supply chains- a sustainable industry- necessitates moving away from the artefacts that underpin the existing monopoly structure; and key among these is pricing control. 

"We are essentially working with customers to develop a market that values secure supply from Australia. Linking prices to the Asian Metals Index only further entrenches China's market power."